Farm Bill Legislative Committee Considers Dairy Safety Net Alternative Offered by Ohio State University Economists in Potential Compromise

Jan. 14, 2014

This article was originally published on the website of OSU's College of Food, Agricultural, and Environmental Sciences.

COLUMBUS, Ohio – A dairy safety net alternative formulated recently by a pair of dairy economists with Ohio State University’s College of Food, Agricultural, and Environmental Sciences is currently being discussed by lawmakers as a potential compromise to possibly end the dairy standoff that is one of the latest roadblocks in getting a new farm bill passed.

According to published reports, a compromise based on an independent analysis of the farm bill’s dairy safety net proposals formulated by Cameron Thraen, an associate professor in the college’s Department of Agricultural, Environmental and Development Economics, and John Newton, a recent doctoral graduate in agricultural economics, is among the alternatives being floated by lawmakers as a potential solution to the dairy issue that is holding up the farm bill.

Based on the analysis, Thraen and Newton formulated an alternative, compromise version of the dairy safety net program, which, according to published reports, has garnered interest among some lawmakers in Washington, D.C. Thraen and Newton’s proposal includes a dairy producer margin protection program coupled with the current Milk Income Loss Contract (MILC) program but does not include a dairy market stabilization program.

Of the many issues to be resolved in the House and Senate versions of the farm bill, the safety net proposals in the dairy title currently present the most significant shift in federal dairy income support policy that the U.S. has seen in the past 60 years, said Thraen, who also holds appointments with Ohio State University Extension and the Ohio Agricultural Research and Development Center (OARDC).

OSU Extension and OARDC are the statewide outreach and research arms, respectively, of the college.

“Our independent economic analysis indicates that offering dairy farmers a choice between an expanded ‘Milk Income Loss Contract’ program and a limited ‘Income Over Feed Cost’ margin insurance program extends safety net support to the wide array of dairy farms regardless of size and at a cost lower than either of the alternatives put forth by the House or Senate,” said Thraen.

“This program would increase eligibility of MILC to 4 million pounds per year and allow farms an option to choose annually between MILC participation or a stand-alone margin insurance program as their elected safety net. Specifically, our proposal is for a combined program we term MILC-Insurance.”

Debate on the farm bill has been ongoing for more than two years, with the latest roadblock for lawmakers being the dairy policy, which has been gridlocked around the dairy title, as key legislators have conflicting views on the topic. The farm bill conference committee has been working to develop a dairy title compromise and, in doing so, they have shown interest in the safety net alternative offered by Thraen and Newton, according to published reports in The Hill, a Washington, D.C.-based newspaper, and the Hagstrom Report, an industry-based news service also in Washington, D.C.

“Medium and small-scale producers, which comprise 75 to 80 percent of U.S. producers, like MILC as their safety net,” said Thraen. “Larger scale producers, for whom the current MILC program provides only marginal support, would more reasonably take the option of the margin insurance as their safety net.”

To read Thraen and Newton’s policy brief on the dairy safety net alternative, visit: “The Land of MILC and Honey”; “The Dairy Safety Net Debate of 2013 Part I: Questions and Answers”; and “The Dairy Safety Net Debate of 2013 Part II: Questions and Answers”.

January 14, 2014

Nicole Pierron Rasul

Tracy Turner

Cameron Thraen